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Avoid Shop and Drop! Talk To A Lender First!
By marionduffy | May 1, 2008
Looking at homes before you talk with a lender is like going to the mall with a gift card that you don’t know how much it is worth and which stores will take it. Is it worth $1000 or $100? Is it good at Nordstroms or at Sears? Or at both? Would you wander around the mall trying to decide what to buy with a gift card of unknown value? What a waste of time!
But, this is exactly what a huge number of people do when shopping for a home. Searching for qualification criteria and rates on the Internet is helpful, just as searching for homes on the Internet is a good way to do your homework. However, before you physically go out and look at homes, you must actually talk with a real live lender. Everyone’s situation is different and a good lender will find a program that will work best for you.
It is not only a matter of qualifying for a loan. You also need to know how much the loan will cost and how much your payments will be. You may qualify for way more than the monthly payment you are comfortable paying. Also, there may be loan programs available that you are not aware of that will give you more flexibility in your purchase. Once you know the loan amount you qualify for, how much the monthly payments will be, and the terms of the loan, you will know what price range of homes to consider. Like at the mall, you will know how much that gift card is worth.
Even if you are certain you can qualify for a loan, you still must talk with a lender first. I have had very wealthy buyers run into problems when they attempt to get the loan. These are people who can actually pay cash for the property and have lots of money left over. Sure they can qualify, but it may not be for the loan or terms they thought they could get. By the time they come to terms with the lender, the property they want is no longer available.
In addition, it is to your advantage to have a pre-approval letter from a lender to submit with an offer to purchase. A seller will consider your offer more seriously if they know that you already have loan approval.
Topics: Buyers, Loan approval |
May 7th, 2008 at 11:51 am
It is VERY important for a buyer to know that they are qualified and under what terms. Many lenders are requiring an additional 5% down payment because of their fear of falling property values eroding equity. I also talked to a loan broker yesterday who said that many lenders he works with are requiring 20% down payments. A buyer must not only get preapproved before shopping but must stay in contact with their lender throughout the shopping period so that they will not be surprised by any changes in terms.
May 8th, 2008 at 9:40 am
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